A Couple Of Things To Know Before Getting Into Debt Consolidation
Posted: Jun 08, 2014
If you're in deep debt and getting harassed with phone calls from creditors, debt consolidation can be a sigh of relief. Becoming debt free takes time. The debt consolidation process is slow and gradual, and it requires some smart planning tools. The paragraphs here are going to teach you what you need to do if you wish to consolidate your debts.
When considering what options are available to you with debt consolidation services, avoid the assumption that anyone advertising themselves as non-profit is automatically trustworthy or affordable. Unscrupulous lenders often hide behind this classification, misleading you into signing up for unfavorable loan terms. Go with a group that was personally recommended to you or look at the BBB.
Do you own a life insurance policy? Cash this policy if you want to reduce your expenses. Contact your insurance agent to find out how much you could get against your policy. Sometimes, you can use some of your payments into that policy to pay off debt.
Speak with your creditors when you're about to do business with a credit counselor or a debt consolidation business. They may be willing to discuss alternative arrangements with you. They aren't aware you are speaking with these companies. When creditors understand you're truly trying to manage your debt, they may be more willing to help.
Find out if bankruptcy is an option for you. It can be Chapter 7 or even 13, but it will ruin your credit. But, if you have no way to pay down your debts and you're missing payments, your credit could be irreparable already. When you file for bankruptcy, you may be able to reduce your debt and start your financial recovery.
If you are sent a financial offer in the mail with a low interest rate, this can be used to consolidate all your debts into one simple payment. This will reduce the number of payments you have and reduce the amount of interest you are paying. Once your debts have been consolidated onto one card, you should work to pay it off before your introductory rate of interest expires.
An option to help pay off those credit cards with high interest rates is by taking some money out of your 401k. This should only be done as an absolute last resort since there are significant ramifications if the money is not paid back quickly. If you are unable to, you may have to pay a penalty fee or taxes.
If you have no other option when it comes to your debt, you may want to consider borrowing from your 401K. This is an alternative to taking a loan from a traditional lender. It is a little risky, though, as you're borrowing from funds you'll likely need in retirement.
Before you look into debt consolidation you should try negotiating with some of your lenders. For example, you can call your credit card lender and ask for a better interest rate on the condition that you stop using it, or ask to be placed on a fixed rate if you are currently on an adjustable one. You won't know what they can offer until you ask.
Have you considered debt management? If it's possible to meet your all of your financial obligations with a sufficient amount of organization and management assistance, this may be a faster, better alternative to consolidation. Make some phone calls to find a company that will help you to negotiate lower payments and interest rates.
Find out the physical address of your debt consolidator. There are several states that don't require credentials or licensing for people to begin a debt consolidation business. Make certain your company isn't doing business in one of these states. This important information is very to locate.
When you combine all your debt into one payment it works in your favor to have one simple affordable bill each month to pay off. Paying off your debt in five years is ideal, but you can negotiate both shorter and longer terms. This provides you with a workable goal and a time frame that lets you pay it off.
A truly reputable agency will provide education on managing your finances so that you avoid going into debt in the future. Try finding a professional who offers workshops or at least booklets you can use to learn about good financial habits. If the company you're looking at is not offering this, then look for a company that will.
Debt consolidation can help you and work in your favor if you know what you want out of the process. It isn't enough to just place a phone call; you need to know what you're up against. This article has discussed some of the many ways that you can choose to get out of debt, but it is up to you to take the extra mile!
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